Peter Franck and Stefan Sundgren
The purpose of this paper is to assess whether ownership concentration, leverage and demand for equity financing is associated with internal corporate governance quality. The…
Abstract
Purpose
The purpose of this paper is to assess whether ownership concentration, leverage and demand for equity financing is associated with internal corporate governance quality. The paper focuses on dimensions of governance quality that are related to financial reporting quality.
Design/methodology/approach
The authors measure internal governance quality by an indicator variable that takes on higher values depending on whether a company has an audit committee, has a sufficient number of audit committee meetings during the year, has financial expertise on the audit committee, has an internal auditing function, a risk management function, a code of conduct and whistle blower provisions in the code of conduct. The sample consists of 91 Swedish listed companies of which 39 companies had to follow the Swedish Corporate Governance Code. The development of hypotheses is based on agency theory. Ordered logistic regressions are used to test the hypotheses.
Findings
The paper finds a strong negative association between leverage and the internal governance quality score for companies that do not have to follow the Corporate Governance Code. The paper also finds a positive association between the governance quality score and dispersed ownership among companies that have to follow the code.
Research limitations/implications
The negative association between leverage and governance quality is opposite to the typical agency theory prediction. A number of other studies have also documented negative or insignificant associations with leverage in related settings. The research suggests there is a demand to develop theories related to leverage and the implementation of governance characteristics beyond the typical agency theory based predictions.
Practical implications
The results raise the question whether lenders more actively directly or indirectly should influence the governance quality of borrowers.
Originality/value
Based on the conjecture that governance quality increases with the number of governance elements, the paper studies a governance score that is built up by several elements of good corporate governance. Furthermore, the authors study a setting dominated by voluntary choices of governance quality, which makes it possible to study supply effects.
Details
Keywords
The purpose of this paper is to examine three different responses to the Finnish 2005 tax reform that, among other things, reduced the corporate tax rate and hiked dividend…
Abstract
Purpose
The purpose of this paper is to examine three different responses to the Finnish 2005 tax reform that, among other things, reduced the corporate tax rate and hiked dividend taxation. Focus lies on the factors influencing the decision to change the fiscal year-end and whether earnings management is more prevalent when the decision is not taken.
Design/methodology/approach
This study uses the financial statement data of Finnish private firms and studies 350 fiscal year-end changing firms and 700 non-changing firms with logistic and linear regression analysis. Discretionary accruals are the proxy for earnings management.
Findings
The results suggest that firms seize the window of opportunity and extend fiscal years depending on the magnitude of the expected tax savings. Firms that do not change their fiscal year-end engage in more tax-induced earnings management. In terms of economic consequences, the earnings management approach is less economically significant.
Research limitations/implications
This study only examines a limited number of firms that change their fiscal year-end, hence, care has been exercised in generalising the findings.
Practical implications
The findings may be considered when structuring future tax reforms, particularly when considering transition rules relating to changes in fiscal year-ends. The study may also have implications beyond tax reforms since the evidence of opportunistic changes in the fiscal year-end can be informative for tax authorities, independent auditors and creditors.
Originality/value
This study contributes to the relatively scarce literature on private firm responses to tax policy changes by analysing both upward and downward earnings management, as well as changes in the fiscal year-end. This is in contrast to previous research that mainly focusses on listed firms and absolute earnings management or earnings management in one direction.
Details
Keywords
Eduardo Ortas, José M. Moneva and Igor Álvarez
This paper aims to investigate the link between a sustainable supply chain and companies’ financial performance (FP) and provide empirical evidence about the relationship between…
Abstract
Purpose
This paper aims to investigate the link between a sustainable supply chain and companies’ financial performance (FP) and provide empirical evidence about the relationship between these two constructs. This link is an important, but still unclear, subject.
Design/methodology/approach
Multivariate measures of sustainable supply chain performance and companies’ FP are used for Granger causality tests on a large, diverse sample of 3,900 companies in a time frame of eight years (2004-2011).
Findings
Results indicate general bidirectional causality between sustainable supply chain performance and companies’ margins and revenue. However, the link between firms’ profitability and sustainable supply chain performance is unidirectional. In addition, the recent financial crisis altered this link between the studied constructs. Finally, a wide diversity in relationship patterns between sustainable supply chain performance and companies’ FP emerges when the full sample is divided into different geographical regions and economic sectors as specified by the Global Industry Classification Standard system.
Practical implications
This research makes recommendations for improving several processes, such as stakeholder evaluation of the sustainable supply chain performance of companies worldwide and manager testing of environmental policy outcomes.
Originality/value
Building on the mostly qualitative literature on sustainable supply chain performance and companies’ FP, this research provides quantitative evidence of the gaps between these constructs. This research contributes to the discussions of supply chain management, environmental practices and the drivers of companies’ environmental and financial success.
Details
Keywords
Munwar Hussain Pahi, Umair Ahmed, Sohel M. Imroz, Syed Mir Muhammad Shah and Irene Seok-Ching Yong
The purpose of this empirical research was to investigate the individual effects of three dimensions of flexible human resource management (HRM) practices – skill flexibility…
Abstract
Purpose
The purpose of this empirical research was to investigate the individual effects of three dimensions of flexible human resource management (HRM) practices – skill flexibility, behavioral flexibility and human practice flexibility on firm performance and to what extent these relationships are strengthened/weakened when there was the moderation of empowering leadership in small- and medium-sized enterprises (SMEs) of the Kingdom of Bahrain.
Design/methodology/approach
The data were collected from chief executive officers (CEOs) through a questionnaire survey method to test the hypothesized relationships. A final dataset of 315 valid responses was utilized for data analysis, and results were analyzed using the Smart partial least squares structural equation modeling (PLS-SEM) technique.
Findings
The findings revealed positive effects of skill flexibility, behavioral flexibility and human practice flexibility on firm performance. The moderating role of empowering leadership further strengthened the effects of employee skill flexibility and employee behavioral flexibility had on firm performance. However, empowering leadership did not pose any moderating effect on human practice flexibility and firm performance relationship.
Research limitations/implications
This paper offers implications for theories on HRM and leadership. It also provides valuable insights for organizations and leaders seeking to boost firm performance across SMEs.
Practical implications
This paper offers implications for theories on HRM and leadership and also contributes in the understanding of the modern managers.
Originality/value
This paper investigated the effects of flexible HRM practices on firm performance and the role of empowering leadership across SMEs in Bahrain. It also explored how the performance of SMEs can be improved using flexible HRM practices followed by the presence of empowering leadership.